People power

Charities may think the localism bill is a proposal of relevance only to local authorities, but it contains a number of proposals potentially of interest to third-sector organisations. While there are opportunities for charities, in relation to the provision of services currently provided by a local authority for instance, it's not all good news and charities need to be aware of the limitations rather than rush into something they may regret.

The bill proposes a right for civil society organisations, including charities and community interest companies, to challenge the provision of services by local author-ities. Could this be an opportunity for new charities or social enterprises to start up or an opportunity for existing organisations to take over services presenting them with an opportunity to expand?

Under the bill, civil society organisations would be entitled to express an interest in providing any service which is supplied by a county council, district council or London borough council '“ unless the secretary of state chooses to exclude certain services. The bodies which could challenge are widely drawn to include voluntary or community bodies (a body that carries on its activities primarily for the benefit of the community), charitable bodies, parish councils and groups of at least two staff from the relevant local authority.

Once the expression of interest has been lodged, the local authority is under a duty either to accept or reject it. Regulations made by the secretary of state will set out the permitted grounds for rejection. The local authority would have to consider whether the challenge, if successful, would promote or improve the social, economic or environmental well-bring of the authority's area.

The bill does not restrict challenges to those bodies set up or operating in the area of the local authority concerned, so, although implied by the title of the bill, localism doesn't necessarily mean local.

If an organisation's challenge is successful, there is no guarantee that it would end up as the new provider of the services. This is a major issue. It is a right to challenge and not a right to provide.

The successful challenger would be free to participate, in competition with other bidders, in a procurement exercise, but simply because it wins the right to challenge does not mean it will actually win the contract itself '“ it must still competitively tender for it. The risk for charities is that they put in the work to challenge successfully but then lose out on the tender to commercial organisations that take advantage of the tender opportunity and are able to put in a lower bid.

Right to buy

The bill also contains proposals to restrict the sale of land which is of value to the local community. This has been popularly labelled as a 'community right to buy' that will give community groups the opportunity to acquire properties of community value such as pubs, libraries and shops. The main aspects of the proposals are:

• Each local authority will maintain a list of properties in its area that are deemed to be of community value. Community groups will be able to nominate properties for inclusion on the list.
• An owner of a property on the list who wishes to dispose of it (generally either by selling the freehold or a long leasehold interest in the land) will first need to notify the local authority of the intention to sell. This will then be publicised.
• A two-stage moratorium period will then follow:

a) Stage 1 '“ community interest groups will have the opportunity to notify the local authority of their interest in the property. If no group indicates an interest in the property, the morator-ium will end and the property can be sold in the normal way. Otherwise the moratorium will be extended under Stage 2.

b) Stage 2 '“ the interested community group will have a further period of time during which to put together a bid for the property. In the meantime, the owner will not be allowed to sell the property.

The bill is yet to become law and is subject to parliamentary debate. It also indicates that key issues will be decided at a local level meaning that it could be some time before the full extent of the system is known. The key questions that remain unanswered include:

• Which properties are to go on the list? The bill does not say what is to be 'land of community value' and states that this will be determined by regulations made by the local authorities. Potentially therefore the criteria could vary from area to area.
• How long will the moratorium period last? Again this is something the bill leaves to the local authorities to decide '“ speculation is that the moratorium could be as long as six months but again this may vary from area to area. A balance will need to be struck to allow community groups sufficient time to organise their proposals (is six months enough?) while, at the same time, the interests of the property owners will need to be considered.
• Is it a right to buy or simply an opportunity to bid? The bill is quiet over what happens if a community group makes a bid during the moratorium period and simply provides that a sale cannot take place until the moratorium has passed. Unless the law ultimately provides community groups with some form of first right of refusal, it appears a keen developer could simply raise the bidding to secure the property.

At this stage, the precise implications of the proposals for charities are difficult to evaluate in any detail. However, it is clear that, if passed, the proposals will present opportunities for civil society organisations to develop bids for properties of value to the community. We don't yet know whether any additional rights (e.g. of first refusal) will follow.

On the other hand, many properties currently held by charities may well be deemed to have community value and be placed on the protected list. This will inevitably make the disposal of such properties (which in many cases is already restricted by the Charities Act) an even more cumbersome process.

Either way, it is clear that the proposals are of considerable relevance to charities and present both opportunities and obstacles. Civil society organisations that are close to and understand the needs of the local community will be well placed to meet challenges, but they may still face barriers in bidding for the delivery of local services.

The government's green paper Modernising Commissioning identifies many of the issues with which civil society organisations have to contend when competing to deliver public services. It will be interesting to see how these are addressed to assist civil society organisations in making the most of this opportunity.

Copyright & permissions